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Scenario

The Italian economy recorded a reinforcement in 2017, with GDP growing by +1.5% over the previous year, while expectations for an increase in 2018 have now settled at +1.3% (source: Bank of Italy). Inflation is forecasted to come to 1.3% in 2018 and 1.5% in 2019-2020, driven by a rise in oil prices. The estimates provided by the Bank of Italy for 2018-2020 speak of a national macroeconomic scenario that is positive on the whole, even while growth is expected to continue at a slower pace than in 2017. These forecasts are based on the hypothesis that the ECB will confirm its expansionary monetary policy, despite the anticipated end of QE within 2018.

Gas Scenario icona gas

The scenario outlined by Snam in its forecasts for gas supply and demand from 2017 to 2035 is based on the recovery in the macroeconomic situation and in electricity demand already seen in 2016, with growth in GDP expected to reach 0.8% over 2017-2035. In this context, gas demand in Italy will likely rise by an average of roughly 0.9% per year in between 2017 and 2035, within a scenario that will see the country’s energy mix evolving in line with its environmental objectives. This outlook contemplates both a positive contribution coming from gas demand due to the development of biomethane and a gradual increase in the use of (compressed and liquefied) gas in transportation, favoured by the stricter limits set for motor emissions as of 2020.

 
Gas demand trend in Italy (bl cu.m)

 

Electric Power Scenario icona energia elettrica

From a linear expansion of recent trends in electric intensity, which take into account the impact on the past of recently introduced measures in energy efficiency, Terna has developed two scenarios for future changes in demand :

  • “Basic scenario”, which begins with an estimated 0.9% growth in GDP and takes into account the effect of a full implementation of energy efficiency policies, leading electric intensity to be reduced by 0.5 %;
  • “Development scenario”, which corresponds to a high estimated growth in GDP (+1.3%) and takes into consideration both a different degree of application of energy efficiency policies, leading electric intensity to be reduced by 0.4%, and a gradual spread of e-mobility .

In the period from 2016 to 2026, the development scenario foresees trends in energy demand to reach an average annual increase of +0.9%, corresponding to 341 billion kWh ( TWh ) in 2026. The basic scenario, obtained through estimates of a more modest electricity demand, expects an average annual growth of +0.4%, with electricity demand coming to 325 billion kWh in 2026.

 
Electric power demand trend in Italy (TWh)

 

Environment Scenario icona ambiente

In the environment industry, Italy is still burdened with severe infrastructure shortages against European benchmarks, and the way to recovery is still very uncertain. The downward trend in the use of landfills for municipal waste disposal is ongoing Europe-wide; in the EU-28, the value equals 28%. Landfills are instead the main method of disposal in Italy: 34% of municipal waste disposed of in 2014 was landfilled, whereas 21% was channelled into waste-to-energy.

 
Urban waste: A three-speed Europe and Hera's area of operation is among the most virtuous


To reduce the gap that has Italy ranking behind the rest of Europe, the government adopted a number of key measures, aimed at an optimal use of the existing infrastructure system. Article. 35 of L. Decree no. 133/2014, which was converted - through amendments to Law 164/2014 - into the so-called "Unlock Italy" decree, aims to achieve an adequate, integrated system of solid waste management nationwide, as well as to meet all of the waste collection and recycling targets.
It also aims to ensure national security in terms of self-sufficiency and, as a result, to overcome and to prevent further infringement procedures ensuing from failure to implement European industry standards. C urbing waste landfilling is another key target. In this scenario, the use of waste-to-energy as an alternative to landfill disposal ensues from several sanctions imposed to the Italian State by the European Court of Justice. The latest –December 2014 - amounted to 42.8 million euros for every 6 months of non-compliance and was due to a protracted failure to comply with the European directive on authorization, for 198 landfills in the Italian territory.

 

Water Scenario icona acqua

The Italian water industry has inherited a very disjointed industrial scenario from the past, with large industrial companies coexisting with small and medium businesses, which are often in economic disruption and therefore unable to meet the necessary investment needs.
Furthermore, the failed coverage of the costs incurred over the years has generated low investment levels. For this reason, the rates in some areas of the country - whose values are among the lowest in Europe -  indicate that service quality and stability are relatively poor (e.g. large network losses and low degree of purification).
Comparing the investment expense of other more compliant European countries, if we aim to improve service quality and boost the sector development, a national average investment totalling at least € 5 billion a year is estimated, equalling € 80 per inhabitant.
Transferring tariff accountability into AEEGSI in 2013 was a key turning point towards restoring credibility and perspective in the industry. The results achieved in the first two years are positive.

 
Investment trend in the water industry (bl Euro)


Industry operators are now expecting a type of service quality regulation that rewards best practices by the most compliant companies while acting as a spur for the others.

 

Utilities Scenario Gas Electricity Water Environment

Through the Cottarelli Plan, in 2014 the Government showed that there is a clear, substantial surplus of operators in the local public services, entailing major efficiency / rationalization margins as well as growth opportunities for the largest and most efficient operators in the industry.
Irrespective of some perimeter variances, a recent study by Utilitatis confirms the size of the industry (about 1,100 providers) as well as the current rationalization margin. Surveyed companies generate a global turnover of about € 50 billion and employ more than 200,000 direct and indirect resources. In view of the consolidation expected from the gas bids and from channelling water cycle and urban sanitation into provincial ambits, the streamlining is estimated to involve about 800 operators. Assuming an eventual alignment of current underperformers to best practices, a 1.5 billion € overall benefit is estimated.   

 
Estimate of rationalization areas in the local public services


Page updated 4 September 2018

 
 
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